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Interconnected Economies

Benefiting from Global Value Chains

Global Value Chains (GVCs) have exploded in the past decade and refer to the international dispersion of design, production, assembly, marketing and distribution of services, activities, and products. Different stages in the production process are increasingly located across different economies, and intermediate inputs like parts and components are produced in one country and then exported to other countries for further production and/or assembly into final products. The functional and spatial fragmentation that has occurred within GVCs has significantly reshaped the global economic landscape, thereby raising some new major policy challenges for OECD countries and emerging countries alike: trade policy, competitiveness, upgrading and innovation and the management of global systemic risk.

Global value chains

Managing the risks

Globalisation has made it easier for local risks to become global risks. Global value chains (GVCs) have recently acted as important channels of contagion, because of their global network character. Local demand and supply shocks that start in one part of the global economy can spread rapidly to the entire world. Global disruptions such as the 2008 financial crisis and the 2011 Japanese earthquake have brought the potential global systemic risks to the attention of policy makers. While firms are the first in line to manage the risks of GVCs, governments also have an important role, since disruptions in GVCs can have major political, economic and security implications for national economies. A multi-stakeholder approach on an international scale will increase the speed and effectiveness of pre-disruption planning and of post-disruption responses.